Gary Holt Blog

5 Steps to Increase Profitability with the RAISE Approach

Posted by Andrea Hewett on Thu, Jan, 08, 2015 @ 16:01 PM

PerpetualMoneyMachineDue to the positive response I received from my Finance plan blog, I decided to focus this blog on an overview of the RAISE approach that all businesses need to have in place in order to find and keep happy customers, employees, suppliers and investors. I have included excerpts from Chapter 10 of my book: The Perpetual Money Machine to illustrate this method.

See Incredible Profitability with the RAISE Approach

My years of experience in helping small to mid-sized businesses grow into great investments can be summarized into an easy to remember acronym, which is your recipe for success. It consists of Research, Asset Accumulation and Allocation, Innovation and Integration, Sales and Earnings Growth (RAISE). The RAISE approach includes the key strategies with a proven record of success in achieving controlled, profitable growth.

I am convinced of at least three things:

  1. You must systemize all key business functions.

  2. You must find skilled people committed to enforcing and checking the systems while looking for innovation strategies that change with the times.

  3. You and your key employees must learn to do it yourselves.

Here are the steps that are necessary for you to take in order to achieve your desired level of financial independence. To speed things up, I have included “the perfect business process.”  The process is simple, makes sense and it won’t take a lot of time to implement.

RAISE – The Perfect Business Process Management

R = Research

Over the long run absolutely nothing is more improtant than research. The major objective of research is to discover opportunities.

Research is divided by functions:

  • Marketing – industry structure and competitive strategy
  • Operations and customer satisfaction strategies
  • Finance and information technology
  • Management and human resources – strategy for recruiting

Research is then sorted into current facts, future predictions and trends.

A business plan comprises the very essence of research. The plan converts a good opportunity into a successful business venture. After the facts are gathered, an analytical assessment describes what the research has discovered, as well as the fact-based consequences.

A business plan outline is then written that will resolve short-term issues and help attain long-term goals. The plan would include project plans in each functional area such as marketing, operations, finance and management and updated as needed. 

You will add asset accumulation and allocation, innovation, sales growth and earning growth to your plan as each project plan is completed.

A = Asset Accumulation and Allocation

After your research and business planning has begun, a list of required assets and their allocation is developed. Assets include money, people, sub-contractor lists, customer lists, equipment, buildings, marketing materials, manuals, systems, technology, training and so forth. The most important asset is the people, a combination of technical and industry skills led by a manager trained in the entrepreneurial process – project management is the goal.

Financial asset ratios must be included in the plan such as; debt to equity ratio, quick ratio, return on investment (roi), retained earnings, cash flow (for one to three years) along with profit plans.

The big question – what assets will be needed over what periods of time, in order to achieve the goals set!

A high-performance company should earn a return of 25 percent on investment or more year after year, once it completes its first process cycle. The end result is to accumulate the assets required to achieve financial freedom.

Finding ways to control critical resources without owning them keeps the balance sheet looking good. Leasing, outsourcing and finding ways to lower overhead all contribute. Examine your business plan and ask yourself, what makes us better than our competitors?  That is where you should place most of your assets.

I = Innovation and Integration

Once you know the facts and have a plan, nothing increases sales faster than new products and services. Innovation adds tremendous value, especially if customers grow in ways never thought of.

If you could create new sales at 15 percent per year you would double sales in five years. Even more, innovation can increase productivity and reduce costs as well. Innovation is the creative area of the business that can be applied anywhere.

A big misconception about a new business idea is that it must be unique. Innovation is more about how to do the same thing better for a specific market segment; or how to do it faster, cheaper or better.

Integration means that by affecting just one function in the business you will cause an equal or greater effect on almost every other area. An increase in earnings affects assets, assets affect growth, growth affects sales and sales affects production.

S = Sales Growth Formula

Sales goals need to be developed in order to achieve earnings and asset ratio goals.

There are only seven ways to increase sales:

  • Find new customers
  • Resell more to current customers
  • Develop new products and services
  • Acquisitions
  • Expand to new markets
  • Increase price through value added
  • Create a new division.

Research will help determine which strategies have the best chance for success. If you develop multiple strategies you can grow faster.

E = Earnings Growth Rate

Earnings goals need to be set in order to accumulate the required assets to grow the business to the next level.

You’ll need to invest in one or more of the seven sales growth methods, increase earnings to achieve share holder goals and to develop cash reserves. You’ll also need to increase earnings to offer employee incentives or to sell the business for more profit in the future.

You might be asking yourself how I’ve come to have the authority to tell you what your business needs to succeed. The answer to that very appropriate question is this: I have been in business for myself for almost 30 years and have never experienced a loss at year end.

The truth is you don’t need a M.B.A. to be the best – knowing a lot of difficult-to-understand theories won’t make a difference: you must understand the processes.

If you would like to learn more, including where your earnings growth needs to be, you can buy my book on Amazon here. If you would like help getting your RAISE system in place, email [email protected] or call me at 989-791-2475 and ask for Gary.

Any comments and social media shares are always appreciated!

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